Saturday, March 30, 2013

We told you so

Nearly 10 months in and French President Francois Hollande's promises to curb unemployment are backfiring. It is worse than before the crisis. From Der Spiegel:

Unemployment is 10.8 percent higher than last year -- a harsh blow to Hollande, who promised during his campaign to curb the crisis on the job market. Instead, the jobless rate has steadily risen, bringing to memory a statement made in 1993 by Hollande's predecessor and fellow Socialist, Francois Mitterrand: "Against unemployment, we've tried everything."

In anticipation of catastrophic new reports on the labor market, Prime Minister Jean-Marc Ayrault told the National Assembly on Tuesday that one "has never done enough against unemployment," calling for "a general mobilization" to create jobs in the public and private sectors.

The government has taken a number of measures to combat youth unemployment, such as generous subsidies to companies that hire employees between 16 and 25 for at least one year. The plan was to create 100,000 "contracts for the future" in 2013, but so far only 15,000 people have benefited from the program.

I added the strike through to correct the article's misstatement. Unemployment is at 10.8 percent, higher than the 10.2 percent from when he was elected. Still, these numbers are nearing the record the nation set in 1997.

Unemployment was already climbing when Hollande took office, but the policy tricks he employed were sold to the public as ways to reverse course. They have failed and tricks like subsidizing small companies that hire young workers if they hold on to an old worker clearly aren't working.

The employment for young people in France is about one quarter and much of it can be attributed to worker protection policies. It's incredibly hard to fire a worker so people without prior job experience are a big risk. If they turn out to be terrible, the company is essentially stuck with them .

France also has one of the creepiest Marxist names for a tax ever called the Solidarity Tax on Wealth that annually taxes wealth, not income. Hollande also has been pushing for a 75 percent tax on wealth over €1 million, but the state council struck that down. He's still singing that the and trying to recast it as a corporate tax.

Mr Hollande's soak-the-rich 75 per cent "supertax" was a key electoral promise that was initially supposed to target individuals earning over a million euros per year. It sparked the departure of a string of high-earning public figures – among them actor Gérard Depardieu - but this month the state council ruled anything above 66.6 per cent would be unfair.
Yesterday, the president said: "Shareholders will be consulted on pay and when they go above a million euros, the company will have a levy that all things considered will reach 75 per cent." The tax would last two years.

There was never any reason to suspect these policies would work. Look, I'm not an anarchist and I believe taxes and government regulations are essential to running a successful nation, but there is a point where they become detrimental and France has clearly passed that line. They won't elect anyone who is willing or able to reel it back. Until they do, they shall be doomed to these preventable problems such as persistent unemployment and low growth.